* CEE swept up in Dubai risk, but strategists see calm ahead
* Crown up on cross trades,leu up on suspected cbank presence
* Hungary bond yields rise, budget concerns up
* For Dubai stories see []
(Updates prices, adds quote)
By Jason Hovet and Marius Zaharia
PRAGUE/BUCHAREST, Nov 27 (Reuters) - The Czech crown firmed
on Friday, with investors betting on the unit against central
European peers as appetite for riskier emerging market assets
sunk on debt fears in Dubai.
The Romanian leu <EURRON=> also edged up, with dealers
suspecting a central bank covert intervention to counter flight
from risk. But it was still off a 7-week high hit this week
after the first round of presidential polls. []
Worries that a Dubai debt default could spell trouble for
banks and markets beyond the emirate have sent investors to
safer ground to end this week, knocking emerging European assets
and highlighting debt problems that countries like Ukraine or
Hungary still face.
"Dubai CDSs are further widening today," said a
Bucharest-based trader, explaining falls in the forint and
zloty. "But the crown was used as a funding currency for
intra-region carry trades and those positions unwound today ...
after a hedge fund had a big order on EURCZK."
The Hungarian forint <EURHUF=> was 0.3 percent weaker at
1507 GMT, while the zloty <EURPLN=> was down 0.4 percent.
The Czech crown <EURCZK=>, a traditional safe haven
investment inside the region, rose 0.2 percent on the day,
reversing morning losses after testing a more than 3-week low.
All currencies moved off morning lows on Friday, but with
dealers saying moves had been hit also by low liquidity as U.S.
markets closed for holiday.
Analysts said there was little direct contagion from any
fallout in Dubai as the region's banks have no direct exposure.
"But it also highlights the weaker fundamental stories in
the region, which include Hungary, Ukraine and Latvia...
particularly those that are exposed to high debt levels," said
Simon Quijano-Evans, emerging economist with Cheuvreux.
RISKS REMAIN
Concerns have grown that Hungary, recipient of a $25 billion
International Monetary Fund-led aid package last year, may
overshoot its budget targets next year, which has contributed to
a widening spread between 3- and 10-year bonds in recent weeks.
Hungarian bond yields rose by 5-8 basis points on Friday,
after being up 20-25 basis points earlier in the day.
Mihaly Varga, former finance minister and a top economic
advisor in Fidesz party that is expected to win elections next
year, told Reuters this week that Hungary's budget deficit as a
percent of gross domestic product could be almost double the
target set with the IMF. []
Polish bond yields rose 3-7 basis points along the curve.
Central Europe has seen more volatility in the past months,
hit often by jitters from countries outside the immediate
region. Concerns over Ukraine's debt situation first weakened
central European currencies and banks last week. []
But strategists have forecast firmer currencies over the
next year [], saying the region is past the worst
of the economic crisis, although recovery will still be sluggish
compared to bumper growth in recent years.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 26.245 26.301 +0.21% +1.94%
Polish zloty <EURPLN=> 4.165 4.149 -0.38% -1.2%
Hungarian forint <EURHUF=> 272.77 271.83 -0.34% -3.38%
Croatian kuna <EURHRK=> 7.318 7.304 -0.19% +0.64%
Romanian leu <EURRON=> 4.274 4.285 +0.26% -6.07%
Serbian dinar <EURRSD=> 94.601 94.64 +0.04% -5.41%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +6 basis points to 114bps over bmk*
7-yr T-bond CZ7YT=RR +1 basis points to +119bps over bmk*
10-yr T-bond CZ10YT=RR -12 basis points to +96bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +8 basis points to +371bps over bmk*
5-yr T-bond PL5YT=RR +8 basis points to +345bps over bmk*
10-yr T-bond PL10YT=RR +6 basis points to +305bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +4 basis points to +560bps over bmk*
5-yr T-bond HU5YT=RR +7 basis points to +508bps over bmk*
10-yr T-bond HU10YT=RR +4 basis points to +447bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1707 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news []
Spot FX rates
Eastern Europe spot FX <EEFX=> Middle East spot FX <MEFX=>
Asia spot FX <ASIAFX=> Latin America spot FX <LATAMFX=>
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World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
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(Reporting by Reuters bureaux; writing by Jason Hovet and
Marius Zaharia; editing by ...)
((prague.newsroom@thomsonreuters.com; Reuters Messaging:
jason.hovet.reuters.com@reuters.net; +420-224 190 476))
